19/12/2014 – Public comments are invited on this discussion draft which deals with work in relation to Actions 8, 9, and 10 (“Assure that transfer pricing outcomes are in line with value creation”) of the Action Plan on Base Erosion and Profit Shifting (BEPS).
The OECD Action Plan on Base Erosion and Profit Shifting, published in July 2013, identifies 15 actions to address BEPS in a comprehensive manner and sets deadlines to implement these actions.
Actions 8, 9 and 10 pertain to a number of closely related topics. These include the development of:
(i) “rules to prevent BEPS by transferring risks among, or allocating excessive capital to, group members. This will involve adopting transfer pricing rules or special measures to ensure that inappropriate returns will not accrue to an entity solely because it has contractually assumed risks or has provided capital. The rules to be developed will also require alignment of returns with value creation.”
(ii) “rules to prevent BEPS by engaging in transactions which would not, or would only very rarely, occur between third parties. This will involve adopting transfer pricing rules or special measures to: (i) clarify the circumstances in which transactions can be recharacterised.”
(iii) “transfer pricing rules or special measures for transfers of hard-to-value intangibles.”
The discussion draft is divided into two parts. Part I contains a proposed revision to Section D of Chapter I of the Transfer Pricing Guidelines, and comments are invited on the revisions. The proposals emphasise the importance of accurately delineating the actual transactions, and include guidance on the relevance and allocation of risk, determining the economically relevant characteristics of the controlled transaction, and on recharacterisation or non-recognition of transactions.
Part II of sets out options for some special measures, as envisaged in the BEPS Action Plan with regard to intangible assets, risk and over-capitalisation. A series of questions relating to all the options has been set out, and responses to these questions will be taken into account when considering the appropriateness and design of each option.
Interested parties are invited to submit written comments by 6 February 2015 (no extension will be granted). Comments should be sent by email to TransferPricing@oecd.org in Word format (in order to facilitate their distribution to government officials). They should be addressed to Andrew Hickman, Head of Transfer Pricing Unit, Centre for Tax Policy and Administration. Comments in excess of ten pages should attach an executive summary limited to two pages.
Please note that all comments received regarding this discussion draft will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective, or the person(s) on whose behalf the commentator(s) are acting.
Public consultation meeting
A public consultation on the discussion draft and other topics will be held on 19-20 March 2015 at the OECD Conference Centre in Paris. Registration details for the public consultation will be published on the OECD website in due course. Speakers and other participants at the public consultation will be selected from among those providing timely written comments on the discussion draft.